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Outlook 2018: Change Ahead Despite Leadership Void at HR Agency

• Consideration of would-be Office of Personnel Management chief delayed in Senate, leading to vacuum at OPM• President, Congress will look to cut size of federal workforce, make changes to personnel and retirement systems

By Louis C. LaBrecque

The outlook for federal workers in 2018 is uncertain, with the government’s top HR official still not in place.

What’s clear despite the lack of leadership at the Office of Personnel Management is that the president and Congress want to change the retirement and personnel systems for federal employees while cutting agency budgets, Jessica Klement, legislative director at the National Active and Retired Federal Employees Association, told Bloomberg Law.

Federal agencies submitted reorganization plans to the White House Office of Management and Budget that will be incorporated into President Donald Trump’s fiscal year 2019 budget proposal, which is to be unveiled in February. The OMB told agencies to submit plans that would cut the federal workforce and reduce agency expenditures.

The OMB has kept the agencies’ reorganization plans to itself, Klement said. “But it’s reasonable to assume that cuts are going to be made,” she said.

`Category 5 Storm’

Trump’s impatience with the way the government operates isn’t necessarily a bad thing, Don Kettl, a professor at the University of Maryland’s School of Public Policy, told Bloomberg Law.

Agency leaders for many years have sought exemptions from the personnel system put in place by the Civil Service Reform Act nearly 40 years ago. This has led to a patchwork of laws and policies that’s cumbersome for managers and doesn’t serve the federal workforce, he said.

“We’re drifting into a system that increasingly is a non-system,” Kettl said. “The inconsistencies between agencies are undermining a broad sense of what the civil service system should do.”

Most of the nation’s 2.1 million civilian employees—about 85 percent—work outside of Washington, Kettl said. “Their jobs haven’t changed a bit” since Trump’s inauguration, he said.

But Trump’s presidency makes changes more likely to the way federal workers are hired, fired, and compensated, even if the president himself isn’t focusing consistently on these issues, Kettl said.

“There’s a category 5 storm at the center of this administration,” he said, referring to Trump. “So much noise and chaos at the center creates opportunities” for longtime proponents of overhauling the civil service system “to work below the radar,” with the president’s support, Kettl said.

Still Awaiting Chief

Responsibility for implementing the administration’s personnel agenda normally would fall to Jeff Pon, Trump’s pick to lead the OPM. But Pon, who was nominated in September, still hasn’t gotten a vote in the Senate Homeland Security and Governmental Affairs Committee, a first step to Senate confirmation.

Sen. Ron Johnson (R-Wis.), the committee’s chair, said he would delay consideration of Pon’s nomination until OPM turns over documents related to its October 2013 decision to allow members of Congress and their staffs to receive employer subsidies under the Affordable Care Act. This was contrary to Congress’ intent when it passed the ACA, Johnson said during a committee hearing.

The delay leaves the OPM able to handle day-to-day tasks but not to drive change, Kettl said.

“Snow days are important, but they’re not the center of OPM’s mission,” Kettl said, referring to the agency’s responsibility for determining whether federal facilities remain open during inclement weather. Modernizing the federal personnel system would be a better focus for the agency, but this kind of initiative usually is driven by a confirmed agency head, he said.

Pon, an OPM official during the George W. Bush administration who most recently was chief human resources and strategy officer at the Society for Human Resource Management, is backed by groups representing more than 200,000 federal supervisors, managers, and executives.

Federal employee unions are taking a wait-and-see approach.

“We won’t know Pon’s full intent until he gets into office,” Steve Lenkart, executive director of the National Federation of Federal Employees, an AFL-CIO affiliate, told Bloomberg Law. “The jury’s still out,” even with Pon’s “strong” HR background, Lenkart said.

The OPM declined to comment on its plans for the year ahead. The White House and OMB didn’t respond to requests for comment.

Change Is Coming

OMB Director Mick Mulvaney told agencies earlier this year to submit plans no later than Sept. 30 for “reforming the federal government and reducing the federal civilian workforce.”

The OMB will use the submissions as input for the White House’s fiscal year 2019 budget request, Mulvaney wrote.

One new law affecting federal workers is already in place, Kettl noted. The VA Accountability Act, signed in June, allows the secretary of the Department of Veterans Affairs, using an expedited process, to demote, suspend, or fire employees.

Reps. Brad Wenstrup (R-Ohio) and Barry Loudermilk (R-Ga.) are looking to extend such authority to other agencies. The two congressmen, joined by 38 other House Republicans, sent a letter to agency heads Nov. 6 asking whether similar authority would “be beneficial to operational efficiency, morale, and employee accountability” at their agencies. The agency chiefs, who are mostly political appointees, likely will tell the lawmakers that they favor such legislation.

“We are still collecting responses” from agencies, a staffer for Wenstrup told Bloomberg Law when asked for an update on the effort.

Congress also will look at changing the federal retirement program, Klement said. Possibilities include changing the salary-based formula for determining retirement benefits, making federal workers contribute more to their retirements, and lowering investment returns in a Treasury bond-based fund for federal workers and retirees, she said.

Republican leaders in Congress need to pay for priorities such as overhauling the tax code and increasing defense spending, Klement said. They may try to offset these costs by cutting federal workers’ pay and retirement benefits, she said.

Federal workers hired before Jan. 1, 2013, pay 0.8 percent of their salaries toward their retirements; those hired during calendar year 2013 pay 3.1 percent; and those hired after 2013 pay 4.4 percent. The increased contributions from new federal employees were passed by Congress to fund then-current spending priorities, Klement said.